Analysts dubbed it a “frightful fortnight” for savers, with the sell-off expected to continue into next week.

Greece today cleared €3.4bn owed to the European Central Bank, effectively ending the bitter feud dividing the leftist-governed eurozone nation and its European creditors that threatened to force the country out of the euro and sow chaos in the global economy.

On the AIM market, home to many tech firms including iomart (down 2.4%, Monitise down 2.2%) the market as a whole fell by 3.02%.

Precious metals miners outperformed as investors seeking safe havens took gold to a six-week high.

Richard Hunter, head of equities at Hargreaves Lansdown stockbrokers, said: “China’s contribution to a potential global slowdown has unsettled markets again this morning, with sellers pushing against an open door, exacerbated by light volumes as the City waits to return to full strength at the end of this holiday month”.

In the US, the sell off saw Wall Street suffer its worst one day drop in four years, with the Dow Jones Industrial Average tumbling 3.12 per cent to 164,459.75, while the S&P 500 slumped 64.84 points to close at 1,970.89.

Selling was sparked by data released yesterday showing that activity in Chinese factories dropped sharply last month. In July previous year there was net borrowing of £100million.

The latest figures from the Office for National Statistics mean government borrowing for the financial year since the start of April now stands at £24billion. The Shanghai composite, down heavily in recent weeks, slipped by more than 8% and has now lost all its gains for 2015 – despite attempts by Beijing to arrest the slump.

Some of Britain’s biggest companies have major operations in China, including fashion group Burberry, and Persil and Marmite owner Unilever.

But nearly all top-flight shares were ahead today, with the index pulled higher by a recovery in mining stocks such as BHP Billiton and Antofagasta – which have been pounded by the falls in commodity prices caused by China’s woes.

It suggests that the Chinese manufacturing industry is now in contraction.

China is the third largest market for WPP, which is tipped to say that its pre-tax profits have risen 13 per cent to £600.7million due to strong performances from its advertising and media planning businesses, as well as its digital and healthcare communications divisions.

Revered buyers akin to Iain Stewart, who works for Newton, the fund supervisor, maintain the view that monetary markets have been pushed greater by “quantitative easing”, or money-printing, somewhat than enhancements in corporations’ income, and that consequently the FTSE will fall closely sooner or later.

The currency interventions have triggered uncertainty about the timing of interest rate hikes by the US Federal Reserve. He said: ‘Falls like this are all part and parcel of investing in the stock market… if you look back over the last five years investors have still made 50 per cent with dividends invested’.